The Smuggling of Art, and the Art of Smuggling: Uncovering ... working paper series the smuggling of art, and the art of smuggling: uncovering the illicit trade in cultural property and antiques raymond fisman

Download The Smuggling of Art, and the Art of Smuggling: Uncovering ...  working paper series the smuggling of art, and the art of smuggling: uncovering the illicit trade in cultural property and antiques raymond fisman

Post on 06-Feb-2018




4 download

Embed Size (px)




    Raymond FismanShang-Jin Wei

    Working Paper 13446


    Cambridge, MA 02138September 2007

    We thank Daron Acemoglu, Ben Olken, Zhi Wang, and particularly Patty Gerstenblith for very helpfuldiscussions, and Andre Heng and Chang Hong for superb research assistance. The views expressedherein are those of the author(s) and do not necessarily reflect the views of the National Bureau ofEconomic Research.

    2007 by Raymond Fisman and Shang-Jin Wei. All rights reserved. Short sections of text, not toexceed two paragraphs, may be quoted without explicit permission provided that full credit, including notice, is given to the source.

  • The Smuggling of Art, and the Art of Smuggling: Uncovering the Illicit Trade in CulturalProperty and AntiquesRaymond Fisman and Shang-Jin WeiNBER Working Paper No. 13446September 2007JEL No. F1,K42,O1,Z11


    We empirically analyze the illicit trade in cultural property and antiques, taking advantage of differentreporting incentives between source and destination countries. We thus generate a measure of illicittrafficking in these goods based on the difference between imports recorded in United States' customsdata and the (purportedly identical) trade as recorded by customs authorities in exporting countries.We find that this reporting gap is highly correlated with the corruption level of the exporting countryas measured by commonly used survey-based indicies, and that this correlation is stronger for artifact-richcountries. As a placebo test, we do not observe any such pattern for U.S. imports of toys from thesesame exporters. We report similar results for four other Western country markets. Our analysis providesa useful framework for studying trade in illicit goods. Further, our results provide empirical confirmationthat survey-based corruption indicies are informative, as they are correlated with an objective measureof illicit activity.

    Raymond FismanGraduate School of BusinessColumbia University622 Uris Hall3022 BroadwayNew York, NY 10027and

    Shang-Jin WeiGraduate School of BusinessColumbia UniversityUris Hall, Room 6193022 BroadwayNew York, NY 10027-6902and

  • 2

    1. Introduction

    The smuggling of antiques and cultural property is thought to be big business. All countries

    impose restrictions on the export of various classes of cultural property and antiques,1 ranging

    from archeological objects to coins to older art works.2 Hence their sale abroad often requires their

    illegal export from the country of origin. As with other activities of questionable legality, however,

    it has been difficult to put a precise figure on the full extent of trafficking in cultural goods. For

    trade in antiquities (unearthed ancient objects), which makes up only one component of the total

    illegal trade in cultural objects, estimates ranging from $300 million up to $6 billion per year

    (Atwood, 2004). According to Interpols estimates, the antiquities trade on its own ranks behind

    only drugs and arms in its scale of illegal trafficking (Toner, 1999). Collectively, these illicit

    activities represent the darker side of globalization smuggling requires extra-legal activities that

    may abet corruption, impose a strain on international relations, and potentially dampen the gains

    from legitimate international trade.3 Thus, illicit trade is an important element of political economy

    and international trade. Unfortunately, we have little systematic knowledge of the dynamics of

    illicit trade, as data on illegal activities are by their very nature difficult to obtain.

    In this paper, we analyze the illicit trade in cultural objects by taking advantage of a unique

    aspect of their trade relative to other forms of smuggling: The stark difference in the legality and

    legal enforcement of a particular shipment between exporting and importing countries. In

    particular, the exportation of broad classes of cultural objects is prohibited by most countries

    without a special permit. However, once these (illegally) exported goods have left the country of

    origin, they are not generally regarded as contraband when imported into their destination, absent

    additional agreements that we discuss below (Gerstenblith, 2008). In the United States specifically,

    there is actually a strong incentive to report accurately on the importation of cultural objects: Any

    goods entering the United States that are not properly declared are subject to customs seizure;

    further, the zero tariff rate on antiques and cultural objects entering the country removes any

    incentive to misdeclare valuation (U.S. Department of Homeland Security, 2006). Even in cases 1 Henceforth referred to simply as cultural objects or antiques. Throughout this paper we will be considering those products that, by international trade classification, belong to Harmonized System (HS) Product Code 9706 Antiques of an age exceeding one hundred years. 2 The specific classes of objects that are restricted from export as well as the rules for gaining permission to export restricted objects differ across countries. The rules defy simple categorization or measurement of restrictiveness. See Prott and OKeefe (1988) for the most recent comprehensive description of these laws worldwide. 3 See Andreas (1998) for an overview of these issues.

  • 3

    where importation is of questionable legality, differences in the burden of proof between exporting

    countries and the U.S. generally allow for the relatively easy import of goods whose export would

    not have been permitted by the source country.

    As a result of these asymmetric reporting incentives, reported imports of cultural objects

    into the United States provide a plausible measure of the true level of trade in these goods that

    we may compare with the export levels reported by cultural object-rich countries. The difference

    between these two trade figures provides a credible measure of illegal exports.

    What allows for the illicit export of cultural objects from the source country? Not

    surprisingly, when smugglers are apprehended and their operations exposed, their activities are

    often found to be facilitated through the bribing of customs officials to look the other way (Brody

    et al, 2000). Hence, the illegal and unreported export of cultural objects is relatively easy in

    countries with corrupt bureaucracies that allow for this type of transaction. Hence, if cross-country

    survey-based measures of corruption do indeed reflect underlying corruption realities, these

    measures should be good predictors of patterns of global trafficking in cultural objects. In this

    sense, we may use our measure that is derived from objectively measured trade data to assess the

    validity of these corruption indices that are often based on subjective perceptions.

    In this paper, we present an objective measure of smuggling in cultural objects based on

    this reporting gap between recorded exports on an exporters side and the recorded imports by U.S.

    Customs. Without smuggling (and measurement error), the reporting gap should be zero. If the gap

    were pure measurement error, it should not be correlated with country-level attributes. However,

    we find that our smuggling measure is very highly correlated (with correlation coefficient =0.52)

    with standard cross-country survey-based corruption indices, thus providing compelling and

    objective validation of these indices. This pattern is robust to the inclusion of region effects and

    controls for countries endowment of desirable/collectible cultural objects. Interestingly, our

    smuggling variable is uncorrelated with the log of income per capita once the exporters corruption

    level is controlled for, so it is unlikely that we are simply picking up the effects of country-level


    Several additional tests lend further support to our interpretation of the results. First, the

    corruption-smuggling gap relationship is stronger for object-rich countries. Second, we run a

    placebo regression using data on the reporting gap in the U.S imports of toys between the

    exporters and US customs (U.S. reported imports of toys from a country, minus that countrys

  • 4

    reported exports of toys to the U.S. in the same year). Similar to imports of cultural objects into the

    United States, toy imports also have a zero tariff rate on the U.S. side. In this case, we observe no

    correlation between an exporters corruption level and the customs reporting gap, suggesting that

    cultural objects do indeed present a special case. Finally, we report results for four other countries

    Canada, Germany, Great Britain, and Switzerland all with zero tariffs on cultural objects that

    are also reported to have a significant trade in these goods; we find a positive relationship between

    corruption and the smuggling gap for all four countries.

    Our paper thus makes two primary contributions: Most importantly, we provide a first

    empirical analysis of the trade in restricted goods, and further provide comparable cross-country

    estimates on the smuggling of contraband. 4 We thus contribute to the growing literature on

    measuring underground activities using differential reporting i